Carlos Slim Interview
Financier and Philanthropist

December 2, 2007
Washington, D.C.

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It's said that you have this unusual ability to look at a company or a business that is not doing well, to see that it is undervalued, to acquire that company and make it profitable. Is this something that is instinctive? Is it something that you learn from experience? Is it something that you learned as a student? How do you account for this ability?
Carlos Slim: We look at potential development of the company. To buy it at a low price and in bad condition, it makes it easier. But the good thing is the potential of the company. How far it can go. How far you can develop the company. I think more than the instinct, it's knowledge. Look at the numbers. Like I told you, numbers talk. You look at the numbers, you look at what they're doing. And we have a philosophy of working that makes these things not very difficult, because when you work with austerity, sobriety and you invest in equipment and you reinvest. There are, I think, some basic rules. Nothing magic. Only basic rules to find out which are the conditions of the company and help to change them. But what is clear also for me is that you can do it very fast. You can do it very fast and the faster you do that, the best it is for the business, for the company, for the people involved, to make that. No? Well, you need to work in the whole area, not only finance, not to look only at one area. You need to look at labor, your treatment with people. You need to look that the people should be feeling good in the work they are doing, to be motivated to be there, to have the spirit to be in the company. And you look also at sales. You look at production. You look at finance. You need to look at the whole company and arrange the areas where things are doing bad.
Let's say one example. In some companies, you have a lot of levels of management. Many levels are not working for the operation. They have quarters far from the operation. Corporations, the corporation is outside the operation. We work without corporative people. We focus an operation. We take down as many levels as we can, to make the highest level be near the operation. With practice and experience we make a team that is very efficient, and we do that very fast.
I think it is not instinct. It's experience that you can learn, because it's not done only by me. It's all the team, and the organization is very big. We have nearly 200,000 people working in the group, and we have a lot of young men doing these kinds of jobs. That takes basic rules of management to do that, no? You read a lot of books -- how they do, what they do bad, what they do good, the conglomerates of the '60s, the way they managed. The biographies of some people and what they do, and you can take the good things from them. Not everything, no. And the experience -- you can, I think, have experience from the failures of others and your failures, no? And what we do when we are managing business is that we all need to take decisions, but we try to do small mistakes. We are very, very open to small mistakes. A big mistake is very dangerous. A very big mistake is bad, but small mistakes make the people trained, and they learn how to take decisions and move ahead.

Do you see yourself as a risk taker? Is it important in life to be willing to take a risk?
Carlos Slim: In my opinion, I never take risks. Maybe small risks, but I think I am not a risk taker. I think I am very conservative. All my life I have been very conservative. Maybe my challenges were not economic or financial, but professional. We took on very strong challenges, but the big risk was not economic, it was professional, not to fail in these big challenges.

In any profession, in any career, there are bound to be some failures. Have you suffered setbacks? Have you suffered failures? How do you deal with that?
Carlos Slim: Well yes, but like I said, small mistakes or small failures. We take small failures very often. We have failures in investment. We have failures in operation, but no big mistakes or big failures. How do we take that? Like ordinary business.

You've been known to buy companies in sectors that other people were leaving. Wasn't that risky? When businesses were failing in Mexico in the early '80s, you had the vision to buy into those businesses, knowing that they would be of great value in the years to come. What gave you the courage to do that?
Carlos Slim: Well, it was in 1982. I was 42 years old. I had good experience, and there were many factors that made it very clear that I should do that.
During the Revolution -- and that's very important, the experience of my father -- my father made his business -- buy 50 percent from his brother -- invested in Mexico. My father was very young. He had no family. He was not married. He was without so much roots in the country, and he stayed in Mexico, and you cannot make any comparison with the revolution. Yet, he invested during that time, and he worked hard in this time after 1911 to 1920 during all these times.
When you read about what happened, in the U.S. in the '30s, it was clear that the country was not finished. We had a big problem (in the 1980s) because the fiscal deficit was very high, but also because the interest rates went above 20. It was 21 or 22 prime rate. The price of the companies was crazy. Not only the values were very low. That was really very, very low. Let's say three percent of the book value, or five percent of the book value. It was crazy. Very, very low.
There were available businesses (to buy). Because in our country, the companies have a "group of control" regularly, because they're not such big companies. Also, there is a group, a person or through the bank, that the controller of the companies is there. In these years, the U.S. companies -- the foreign companies -- want to sell, because to be investing in Mexico was not good, and they sold out these Mexican operations. The banks sold the assets, and many people wanted to sell everything, and we were the only buyers.
That is one of the reasons I got so complex a group with so many sectors, because these businesses were available, one day after the other. That's the only reason we were involved in so many things.
For me, it was very clear that a company that has a debt in foreign currency also has assets in foreign currency, and it was an accounting problem. Let's say a company, before the devaluation, that buys an asset and has a debt in foreign currency is bankrupt that next day. But if you make the investment the next day after the devaluation, it is just accounting. There are also accounting problems that make you think that things are worse than what they are. No?
I think it was a very important experience, what my father had done. I know the history of Mexico, how we had problems in the past, from the 19th century, and the experience of the economies and the markets when you get a depression, a recession. You know, I believe we don't need to have economic cycles.
Economic cycles makes sense in agricultural civilization when you have good weather and bad weather. But in a society of services, it's a psychological problem, no? That sometimes you are very euphoric, very positive, very optimistic, and you get to the euphoria, and everything goes up, up, up, and a lot of inflation of assets and crazy things. In some ways, something is happening. And in the other way, you are pessimistic. You are depressed, and everything is bad. Everything will become worse, and you get out of everything any time, any price, and this is not -- that's completely irrational.

It helps when you understand the numbers and read balance sheets well.
Carlos Slim: That's important to know the balance sheets, but also it's clear that some things will change. You know, a country that has a problem with prices -- after a devaluation, prices are very down, very low, they need to come back to have investments. There is an overshoot of the currency and some other conditions, and we have done when -- we are very clear that we are not speculators or investors in a short term. We are looking for a long-term plan. We don't worry about what is happening because there is a crisis today, like it was in '95 crisis. We invest more. It's a better moment to invest because you find many things, many opportunities of people that want to get out.

Could you tell us how you overcame a challenge from a competitor? What about the Spanish company Telefónica? What was difficult about that?
Carlos Slim: When Telefónica went to Mexico? When any international company can come in, while you stay only in your own market, he can corner you, because he can move the prices as he likes, just to destroy your market position. So we decided to go where he was. We couldn't go to Spain. It was a pity. We'd love to be in Spain, but we went to many countries as we were, Argentina, Peru and Brazil, especially Brazil, and we were looking to be international. We told our managers -- the ones who want to be international -- we gave them a special, accelerated training, because they were going to go to other countries. We began in a small part of Brazil, then Colombia and Ecuador and Guatemala. Many countries. We're in like 17 countries now.

When you went into those countries, did you acquire a company and then put your managers in charge, or did you start from the grassroots? From the ground up?
Carlos Slim: Well, depending. If some company is available on good terms, we buy the company, and in other places, we buy the license, and we begin with zero, work from the grassroots, like you say. That was the case of Uruguay. In Brazil, there are many regions. In some regions, we buy a company there, in other regions, we buy the license.

To do an acquisition, as opposed to starting from the grassroots, there are positives and negatives about both of those. Is one easier to do or better?
Carlos Slim: Depending on the price that you are paying. If they are selling you a company that's very, very, expensive and you can buy the license yourself, it's better to buy the license. It's always better to begin with a working company because they already have market infrastructure. You win time if they're already in the market. Sometimes you can't buy a company, and you need to buy the license and go from scratch. It doesn't take too much time, but it takes time to begin with zero, like you say. You need to create not only the infrastructure and the investments, you need to create the human team, the people. You need also to create your dealer organization, the dealers that are going to sell your products.

We've read about the "official principles" you created for Grupo Carso. Can you tell us a little bit about them?
Carlos Slim: There are some principles that we use that are the way we work. We try to live by them all the time and work with them. One is that the money from a business goes into operation, you look for reinvestment. Another is that you be very competitive with modern equipment and technology and that you use an international reference (benchmarks). The structure should be very, very thin, not to have many levels of management. When you have the president, the subpresidente, the represidente and so on, you are too far from the operation. The concept is to be directly in the operation.

Hands on?
Carlos Slim: Hands on. The director and the president of the company works inside the industry, with the labor people. When there are good times, capitalize strongly and accelerate the growth, and in the bad times, you don't need to make layoffs, because you're working with what you need. You know the English economist Keynes?

John Maynard Keynes?
Carlos Slim: Yes. You know, Keynes was not original. It's in the Bible, seven years of fat cows and seven years of thin cows. Vacas flacas. How you say vacas flacas?

Skinny cows?
Carlos Slim: You remember in the Bible, Joseph makes an interpretation of the dreams of the Pharaoh, and he says, "You will have seven years of fat cows and then seven years of starving cows. So in the years of the fat cows, let's save grain for the years of the skinny cows." That means, in the new economy, the fat cows are superávit (surplus) and the starving cows are the deficit.

So you save and prepare for the lean years.
Carlos Slim: Yes. That's Keynes. What I say is that in the years of the fat cows, business needs to capitalize and accelerate development, so in the years of the starving cows, you don't lay off people. You've already created the wealth and the surplus for these starving cows. You will grow, because you have the grain.

It takes discipline to do that.
Carlos Slim: It takes a combination of ways to do these things, more than discipline. It's a way of life. It's like diet or gymnastics. You can know all the gymnastic things, all the exercises. You can know all the diets, but if you don't do the diets, if you don't do the exercise, it won't work. It's the same if you have some rules, but you don't live them. It doesn't work.

So in that way of life, no matter what the immediate conditions are, you conduct yourself in that manner?
Carlos Slim: Yes. And the organization works in this direction. When we buy a company outside Mexico, we only send two or three people there. The main point for them is to be in a winning team and a winner company. Triumfador, how you say? A winner. In a good company, it has to be clear that he will have a job, that he will have his material problems solved, and that he will have the possibility of personal development, human development.

A good future.
Carlos Slim: A good future, but not because of his face, or his attitude, or because of what we call "Fighting to the public." You need to fight to the bull, not to the public. When you work for your chiefs, to convince them, giving speeches instead of having both hands on, then you're not doing your job okay.

Very good principles. They sound so simple and basic, but profound. They make a difference in the way a business is run, even in the way you conduct yourself in life.
Carlos Slim: Yes. It's like in sports.
Sometimes you have a team, and there is a manager or a coach or something in charge, or a technical director. Some of them make a very good team, and others make a very bad team of the same people. You need the people that love what they are doing, to work in harmony, to work in a team, to work together, and that they feel that they are working in a group that is a winner. Actually, from other teams, we take people. We fill the executive functions from the same people that are working within the group. We can move the group from one company to another, but we don't bring people from outside, regularly. We create the people inside. We develop the people inside.

So you train them in your principles.
Carlos Slim: Yes. The director of the group is the same in one company as in the other. They feel that they can confront any challenge and make it, to be winners in life and professionally.

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